Cross-collateralization: Handle with care

Description

Abstract: One potential strategy for reducing risk associated with commercial loans is cross-collateralization — that is, using multiple properties to secure a loan associated with one property. This strategy can provide significant benefits, but it raises several issues banks must consider before adoption. This article discusses some of the accounting concerns, along with considerations involved when restructuring debt. A sidebar highlights two Department of Labor advisory opinions regarding cross-collateralization agreements with IRA owners.